Employment Law Update 2019

As we enter the new year, now is a good time to review your employment-related policies and procedures and update them as needed to reflect the newest employment law developments.

Responding to greater awareness generated in part by the “Me Too” movement, the California  Legislature passed several pieces of legislation addressing sexual harassment in the workplace and an employer’s attempts to limit disclosure of such allegations. These new laws became effective on January 1, 2019. In addition, gender composition on corporate boards was addressed for the first time by the  Legislature. Finally, a key employment case on non-solicitation agreements that will affect the way many California businesses operate was decided in 2018.

Prohibiting Limitations on Disclosure of Sexual Harassment Allegations 

California Civil Code Section 1670.11 and makes unenforceable any provision in a contract or settlement, entered into after January 1, 2019, that prevents a party to the contract from testifying in an administrative, legislative, or judicial proceeding about alleged criminal conduct or sexual harassment by the other party to the contract or its employees/agents.

Settlement of Sexual Harassment Claims

California Code of Civil Procedure Section 100 invalidates any provision of a settlement agreement, entered into after January 1, 2019, that prevents the disclosure of factual information pertaining to claims of sexual assault, sexual harassment, gender discrimination, or related retaliation filed in court or before an administrative agency. The new law does not prevent the parties to the agreement from, at the claimant’s request, including a provision that limits the disclosure of the claimant’s identity or of facts that would lead to the discovery of the claimant’s identity. This new law expressly does not prohibit a settlement agreement provision that precludes the disclosure of the settlement amount.

New Sexual Harassment Prevention Training Requirements

Existing law requires employers with 50 or more employees to provide supervisors with sexual harassment prevention training. Now, employers with 5 or more employees must comply with the training requirement. The law requires employers to provide at least 2 hours of training to supervisory employees and at least one hour of training to non-supervisory employees by January 1, 2020, and once every two years thereafter. It also requires the DFEH to develop and publish training materials for employers to use for these purposes.

Amendments to the Fair Employment and Housing Act (“FEHA”)

Under existing law, an employer may be responsible for the acts of nonemployees in a sexual harassment claim, if the employer knew or should have known about the conduct and failed to act.  Non-employees include persons such as applicants, unpaid interns or volunteers, or persons providing services under a contract.  One aspect of this new law expands employers’ potential liability for the acts of non-employees to any form of harassment prohibited under FEHA, not just sexual harassment. It applies the same standard—if the employer knew or should have known of the non-employee’s conduct, and failed to take immediate and appropriate corrective action, the employer may be liable. Another aspect of this new law prohibits an employer, in exchange for a raise or bonus, or as a condition of employment or continued employment, from (i) requiring the execution of a release of a claim or right under FEHA, or (ii) requiring an employee to sign a non-disparagement agreement that purports to deny the employee the right to disclose information about unlawful acts in the workplace, including, but not limited to, sexual harassment. It is important to note that the new law does not apply to negotiated settlement agreements to resolve a claim filed by an employee in court, before an administrative agency, alternative dispute resolution forum, or through an employer’s internal complaint process.  Another aspect of the new law expressly provides that a prevailing employer shall not recover attorney’s fees and costs unless the court finds the employee’s action was frivolous, unreasonable, or groundless when brought or that the plaintiff continued to litigate after the action clearly became such.

Gender Composition On Corporate Boards of Directors

To address gender discrimination and inequality, the Legislature passed this new law (Corporations Code Section 301.3) providing that by the end of 2019, any publicly held domestic or foreign corporation with principal executive offices in California must have at least one female director on its Board of Directors. By the end of 2021, these corporations must comply with the following: (1) If its number of directors is six or more, the corporation shall have at least three female directors; (2) If its number of directors is five, the corporation shall have at least two female directors; (3) If its number of directors is four or fewer, the corporation shall have at least one female director.

Non-Solicitation Agreements: AMN Healthcare, Inc. v. AYA Healthcare Services, Inc.

Turning now to developments in case law, the Courts of Appeal published several significant rulings in 2018, but few more significant than the decision of the Fourth Appellate District in AMN Healthcare, Inc. v. AYA Healthcare Services, Inc., in which Solomon Ward represented AYA Healthcare Services, Inc. and its nurse recruiters. The AMN  v. AYA decision clarifies California’s rules limiting the validity of non-solicitation of employee agreements.

AMN and Aya are competitors in the business of providing temporary nurses to health care facilities, in particular “travel nurses.” The individual defendants were former employees of AMN who left AMN and went to work for Aya as travel nurse recruiters. Each had signed an agreement with AMN not to solicit AMN employees for at least one year post-employment. Travel nurses were deemed to be employees of AMN while on temporary assignment for AMN.

AMN sued Aya and the individual defendants for various claims, including breach of contract and misappropriation of confidential information, including trade secrets. Aya and travel nurses (“Defendants”) moved for summary judgment on the grounds that the non-solicitation agreement was void and unenforceable under California law. The court ruled in favor of defendants and enjoined AMN from enforcing the non-solicitation agreement against any former AMN employee in California.

The Court focused on California’s broad public policy in favor of allowing individuals to seek employment. The Court ruled that AMN’s non-solicitation of employee agreement was void and unenforceable under California law; and that AMN violated California’s Unfair Competition Law by having the provision in its employment contracts.

Also rejecting the misappropriation claim, the Court ruled that the nurses’ names and contact information were not AMN’s trade secrets. The nurses’ identity and contact information were known to AYA before any of the individual defendants left AMN.

In light of the Court’s ruling, employers should carefully review their non-solicitation and  trade secret agreements with their employment counsel.

Conclusion

These are only some of the many changes that continue to affect California employers.  To the extent that any of these changes affect your business, we suggest that you amend your policies, practices, and procedures accordingly.  If the need arises, we look forward to assisting you with any questions or concerns you may have with respect to your employment practices.

***The information provided in this article is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice regarding any particular issue or problem.***

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